For Premium CPM Prices, the Only Way Is Up
Performance focus widens gap between premium and nonpremium inventory
June 26, 2014
In the desktop display space, viewability, programmatic advertising and a more performance-conscious approach to media buying continue to strengthen and coalesce, creating a widening divide between CPMs for both premium and nonpremium inventory. Put simply: Buyers want display ads that perform, and they’re willing to pay a premium for them, according to a new eMarketer report, “Desktop Display CPMs 2014: Rising at the Top, Falling at the Bottom, Squeezed in the Middle.”
Which way are digital display prices going? Up? Down? Yes … and no. The fact is, CPMs are basically flat—at least in aggregate.
According to TV, radio and digital cost analysis firm SQAD, the average CPM of US desktop display ads purchased directly from publishers or ad networks has moved in a tight range in the past couple years. In calculating these averages, SQAD considered reported CPMs for standard banners and rich media from more than 300 websites and ad networks.
At a macro-level, this data suggests a relatively mature, stable market. But aggregate averages have limited benchmarking value, considering how diverse and distinct each inventory type, source and format can be.
In fact, looking beneath the apparent stability of the aggregated digital display market, there are distinct subsets of inventory types where prices are changing significantly. And a key driver of those changes is a shift in focus on the part of buyers, who are beginning to prioritize performance of display ads over the cost of ads.
This performance-centric approach is driving up CPM prices for more premium inventory. It is also ushering in greater demand for better-performing—and costlier—nonbanner ad formats such as video and rich media, the result of which is an even greater cost gap between what is considered premium and nonpremium inventory.
But that’s not the only influence widening the cost divide. The impending move toward a viewable CPM is also driving up prices on the high end and devaluing lesser-quality inventory—much of which is presently considered nonviewable.
The rising value of viewable ads will exert significant downward pressure on nonviewable inventory, creating a widening gap between the two.
But not all lower-quality inventory is doomed to shrinking CPMs. Nonpremium inventory procured through programmatic channels should see a rise in price if it is paired with audience targeting data, which improves performance.